Recently, a group of 19 U.S. Senators sent a letter to the Small Business Administration, Treasury Department, and Federal Reserve raising concerns that several major financial institutions may be inclined to withhold support for certain industries through the Paycheck Protection Program and other COVID-19 relief efforts. The industries in question – the energy sector, federal contractors for ICE, and gun manufacturers, among others – operate in good faith and compliance with the law but have been singled out because they are politically contentious to some. This discrimination against entire legitimate sectors of the economy falls well outside the authority of these banks and is an affront to workers and small businesses across the country struggling to recover from this downturn.
The Institute for Pension Fund Integrity has sent an open letter to Congressional Leadership and key members of the House Financial Services and Senate Banking, Housing and Urban Affairs Committees in support of these efforts to combat banking discrimination.
Several banks have cited their operation in the free market as justification for their decisions to provide or not provide credit. While most private companies do have the flexibility to operate as they see fit and do business based on broader political trends, this is not the case for federally chartered and insured financial institutions. Frankly, banks do not operate in the free market – without significant federal backing, and formal approval from the FDIC, they would be unable to do business. The relationship between the banks and the government is symbiotic. Just as the government came to the rescue of big banks in the aftermath of the 2008 financial crisis in order to stabilize the economy, these banks now have an obligation to step up and do their part in this time of economic turmoil. Denying loans to entire industries based on political pressure is an affront to the American taxpayers who have subsidized these institutions. It is especially egregious when it involves money loaned through the Paycheck Protection Program and other COVID-19 relief bills.
We strongly believe that in this time of economic crisis, every resource available in the public and private sectors must be utilized to bring about a robust and widespread recovery. We welcome and applaud the efforts of these Senators to ensure that the financial resources at the disposal of financial institutions are used in an unbiased manner, and that their loan decisions are made based on creditworthiness, not politics.